Is Kanabo a good investment? Here’s what I think
Kanabo (LSE:KNB) is an Israel based company focused on the production and distribution of Cannabis-derived products for medical patients, and non-THC products for CBD consumers. The market of Cannabis based products was worth $5 billion, in 2019 and is expected to reach approximately $52 billion by 2027, as per the company’s statement.
But is Kanabo a good investment for my portfolio? Let’s explore further and find out.
Amazing Stock Performance
Kanabo launched itself on the London Stock Exchange in February 2021 through an initial public offering (IPO) which helped raise £6m.
Astonishingly, Kanabo shares soared above 20p by mid-afternoon on its first day of trading. This reflects a remarkable increase of more than 200%. In addition to this, the next day, the stock shot high up to 50p and closed at 40p, again exceeding expectations. Moreover, the trading volume hit approximately 130 million. Finally, on the third day, trading was a bit less intense with a reduced trading volume. But, the closing price of the stock was still high and closed at 39.6p.
Since then, it’s taken a bit of a tumble, and currently, Kanabo is trading at around 19p today.
|Date||Opening Price||Closing Price||Traded Volume (Million shares)|
|16th February 2021||13.5||18.5||71|
|17th February 2021||19||40.8||130|
|18th February 2021||14.5||39.6||57|
Kanabo has been branching out and creating its place within the market. It has partnered up with similar companies to support and expand its business. Some of these partnerships include:
- A supply agreement with Hellenic Dynamics to provide 1,000kg of EU GMP certified cannabis materials.
- A production agreement with PharmaCann Polska to increase its manufacturing capacity by 36,000 vaping cartridges per month.
- A distribution agreement with Astral Health to gain direct access to their medical patient network.
In addition to these collaborations, the company has been investing in producing its flagship vaporisation device called VapePod MD. The medical device is currently being reviewed for certification. However, this certification process could take several months.
The risks ahead
Kanabo is a fairly new business. And with the cannabis market growing, more and more companies have entered the market with their CBD products. Moreover, with no past record, it is difficult for me to forecast its future performance. One thing which my knowledge about the industry tells me is that the current share price is a result of optimism rather than underlying fundamentals.
Another concerning fact is the rising number of EVALI (vaporiser-related illnesses) cases. Regulators may begin to impede the firm’s growth prospects if their current investigations discover a tangible health impact caused by vapourisation devices.
Should I invest in Kanabo?
No doubt, Kanabo is a growth stock. But the company is still in its infancy and is just managing to generate revenues. Producing profits is still a long way to go. As a result, the share price is highly speculative.
What’s more, while there is a vast potential in the growing cannabis sector, the barriers to entry remain pretty low. And so, for now, I am keeping Kanabo on my watchlist.
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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.